By on May 23, 2019

Over the last six months, automakers have announced roughly 38,000 job cuts as part of global restructuring efforts. While such things are typically part of the normal ebb and flow of the industry, the ebb could be a prolonged one as manufacturers seek ways to mitigate the high cost of tech and figure out what their businesses should look like in the 21st century.

A litany of other issues are impacting jobs. China’s economy turned out to be less stable than presumed, trade tensions have escalated in practically every major market that builds cars, and most of the developed world appears to be nearly tapped out in terms of sales growth.

As a result, analysts are growing concerned that the layoffs we’ve seen thus far are just the beginning. But they’re not the only ones. Industry insiders are also willing to admit that times are changing — and rather drastically. 

Bloomberg, which has tabulated scheduled layoffs since late last year, did the same for the comments of industry experts attempting to forecast tomorrow. The prognosis could be better.

Let’s start with Ford. Careful not to announce layoffs in lump sums, the manufacturer has promised a 7,000 global staffing reduction as part of its cost-cutting goals. While most of those have been in Europe, with more reported to come focusing on Germany and Ford’s joint operations in China, analyst Adam Jonas of Morgan Stanley said that won’t be nearly enough to reach the stated profit goals of “Smart Redesign.”

“Auto companies globally are contemplating life where global production has greater downside risk than upside,” Jonas wrote in a report on Tuesday. “Ford disclosed that the 7k headcount cuts will save $600 million annually, or an average of $86k per worker … [our calculations] require more than a further 23k salaried headcount reductions.”

For what it’s worth, Ford says it’s doing more than just trying to promote financial fitness amid trying times. It’s changing as a business by moving into electrification, data, mobility services, and all that other tech crap the industry can’t seem to get away from. But it would be unfair to single out the Blue Oval, as most large automakers are doing the same thing to varying degrees.

Daimler’s departing CEO, Dieter Zetsche, said as much while handing over the corporate reins to Ola Källenius this week. “Everything is under scrutiny,” he told shareholders in Berlin on Wednesday. “We cannot and will not be satisfied with the current level of profitability.”

The company has yet to confirm anything, though reports out of Germany claim Daimler could reduce its own headcount by as many as 10,000 employees, and soon. Meanwhile, executives are stressing the importance of improving financial efficiencies.

Dr. Z cited all the usual culprits, specifically the high development cost of new technologies and the fleshing out of Mercedes’ product range, but added that the entire industry is going through a period of change. He said it was up to automakers to prove the change was viable and that electric vehicles must be made profitable to show investors that their money is not ill-placed.

Again, easier said than done. Tesla, for all of its success, has had one hell of a time making EVs work for its bottom line. Its share price has tumbled through 2019. Demand is also down, leading some to believe that this could be a very bad year for the company. However, it’s not just Tesla that needs to worry about sales.

Bank of America Merrill Lynch analyst John Murphy said he believes the entire industry is headed for a “significant downturn,” adding that China’s lackluster performance as a market is leaving many automakers scratching their heads. But, once they’ve stopped, their next move could be issuing more pink slips — as there likely won’t be enough cash leftover to pay for mobility projects, R&D, and non-essential employees.

[Image: Daimler AG]

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40 Comments on “Analysts: Recent Automotive Job Cuts Are Just the Beginning...”


  • avatar
    1998S90

    $89k feels a bit light for a total benefits package, but let’s roll with that. Laying off a total of 30,000 employees will save approximately $2.6B. That’s Billion… With a “B”. About 2/3 of Ford’s net profit. That’s a staggering amount of strategic or financial mismanagement.

    • 0 avatar
      highdesertcat

      And it’s all about profitability and fiduciary responsibility to the shareholders.

      It may not be palatable to those getting canned, and in fact it may be downright ruinous for them like the 2008 collapse was for others, but it is a sign of the times. Gotta streamline and increase profitability for the weary shareholders.

      And at least this go’round the economy is strong, unfilled jobs are plentiful, employment participation is at an all-time high, and there is a shortage of skilled workers. Oh, and wages are up.

      And keepers are still keepers, and those who are not, are let go.

      Perfect storm, maybe?

      • 0 avatar
        FormerFF

        “employment participation is at an all-time high” – Not seeing that: https://fred.stlouisfed.org/series/CIVPART/

        • 0 avatar
          highdesertcat

          Agreed, employment participation is not distributed evenly across the US.

          There are SOME areas where there are tons of potential workers who are not a good fit for ANY job.

          But by and large, employment participation for blacks, browns and other people of color is waaaaaay up.

          I recently spent some time at Picacho Peak, AZ, and the people I talked to there are complaining that many of their job vacancies go unfilled because of a shortage of workers and that they had to resort to hiring illegal aliens to do the work. Ditto with The Imperial Valley, El Centro, CA.

          And we’re not talking laborers here in many cases, but managers, schedulers, assemblers, truckers, and other decent paying jobs.

          I suppose it does depend on where a person is at that influences their perception and point of view.

      • 0 avatar
        ajla

        The problem is if you make the wrong call on your “keepers” or cut too deep it can also negatively impact profitability and then you don’t have anyone left to layoff.

        • 0 avatar
          highdesertcat

          Yeah, and then there are the keepers who beat feet out the door for better opportunities; or the keepers who firmly believe in the old concept of “every 3 to 5 years up or out”. No promotion, no raise? Sayonara!

          I hired a retired AF MSgt (Carpenter from Civil Engineering RED HORSE) named Nguyen to be my assistant in rebuilding/refurbing/upgrading homes as rentals for the family business.

          Once he had sucked my brain dry, he struck out on his own and is now the top contractor in my area.

          I imagine that can happen to any business or employer. The good people, the good workers, leave to strike out on their own, because they CAN.

          Why not autoworkers, mechanics, plumbers, carpenters, bankers, cooks, or any other worker with a trade or skill?

          No substitute for being your own boss, but you’ll never work hard than working for yourself.

          Been there, done that.

      • 0 avatar
        EGSE

        HDC…..what? Have you ever worked for a large private corporation?

        When large companies lay off en masse they cut product lines, they axe entire groups, they do asset sales or transfers and subsequently close an entire operation. Or they look for those near the top of the salary range for maximum expenditure reduction.

        The one RIF I was involved in was at a large defense division of a larger company where it was decided they didn’t want to be offering a particular product type. *Everyone* in the engineering group was let go; we were organized by product and the new manager had a hard-on against being in that market. The entire hallway hit the bricks. A few of us were sought after by other product teams but they were told no dice; all of us had decades of experience and therefore also expensive. Saving one of us meant two or more lower-paid people would have to go instead.

        Didn’t bother me a bit as the severance was great and I was picked up quickly by a competitor (thankfully there were no non-compete issues).

        The comments about “keepers” as a definition of desirability has no bearing on reality with the big boys.

      • 0 avatar
        bd2

        “Profitability and fiduciary responsibility to the shareholders” – except when it comes to the immense compensation packages for the top brass.

        When it comes to that (their own interests), all of a sudden, the interests of the shareholders don’t matter so much any more.

    • 0 avatar
      EGSE

      It’s $86k per but I have the same thought. Maybe G&A/OH is accounted for differently, or not at all?

  • avatar
    FormerFF

    With most of the developed world seeing an aging, and then ultimately shrinking population, and an increasing preference for urban living, at some point we’re going to reach peak car. After that, we can expect a steady slow decline in new vehicle sales.

    • 0 avatar
      James Charles

      FormerFF,
      Just look at the Japanese with their aging population. They are a couple of decades or at least one generation in front of the OECD for average age.

      The problem confronting “developed nations” is a triple whammy. Its not just the auto industry getting shaken up.
      1. As mentioned, aging population,
      2. Technological shift (4th Industrial revolution) reducing employment through AI/Robotics across all industires, service, agri, manufacturing, mining etc. Also the retraining and education to support these changes.
      3. Greater global competition. Who best can adapt to the changes.

      This is where I think the bullying tactics currently being used as an instrument od change will fail, and fail completely.

      Jobs have not gone to US or other auto manufacturers. The job scene is changing and the pace of change is increasing rapidly.

      So, I see a greater need to look after the old, provide education/training to the “to be” and current workforce and a further opening up of global markets to facilitate the rapid globalisation and connectivity of people.

      This means many countries will require a huge shift structurally on how to manage and finance this change that covers, social welfare for the aged, improved education for all, increase health costs, etc.

      Australia and the US have been very reliant on its ups to the individual to be responsible for most of what I’ve described. But I view the required changes to be almost as significant as the changes European nations faced after two devastating wars.

      The changes and the co-ordination required are beyond mega project in scale, call it a giga project.

      At the moment unfortunately only one country has the capacity to make this leap. China, but China is an authoritarian regime.

      The West (OECD) need to become much closer so we can manage this change and retain freedom.

      This new approach by the (aggressive unilateralism) US is doomed to fail the Western culture and the freedoms we enjoy.

  • avatar
    SCE to AUX

    1. All the mobility crap needs to go away.

    2. Tesla needs to go into survival mode and stop development on everything but the Model 3 and the Semi (which has actual corporate pre-orders for it). The recent bake sale wasn’t enough to buy them much time. And Mr Musk needs to go away so the BOD can regain control of their runaway train.

    This has the smell of another Carmageddon. Rising interest rates, longer terms, and higher loan defaults are bad indicators as well.

    • 0 avatar
      87 Morgan

      I work in/around the retail dealer network and I wish you were wrong…but things are eerie at a lot of stores right now.

      I think one of the factors that you left out, was peak quality. Zero reason exists unless some major lifestyle change occurred to unload a 6 year old car, especially if you own it. A 2019 of comparable size to a 2013 gets roughly the same mpg and the 13′ is probably still anvil reliable and has bluetooth, why bother spending money when you don’t need to.

      In my case it is an 05′ and an 08′; neither has bluetooth but both are super reliable…

      • 0 avatar
        HotPotato

        I don’t know about peak quality. My ’02 VW was miles more durable than my ’13 Ford; it wasn’t even close. But generally yeah, absolute-garbage cars are very rare at this point.

        • 0 avatar
          volvo

          I took the comment about “peak quality” to mean that we were past it.

          I agree that current models are probably very reliable but as for quality (paint, interior materials, ergonomics) I think we are past the peak and this might be an important reason why people are just holding onto cars until they become too expensive to repair.

          And there is also the boy racer appearance of even cars like the Lexus LS series and other cars that IMO should have an elegant not aggressive appearance.

    • 0 avatar
      James Charles

      SCE to AUX,
      Why should mobility go?

      The future in the automotive industry is the manufacture of appliance like vehicles.

      The future is manufacturing robots similar to the Ford courier robot. That is the future.

      I’d bet within a few decades robots in the home will be common. Imagine if you had to make a decision today regarding how to invest in your home. You need a car, big ass TV, washing machine, etc. All these purchases impact how much money you have left to buy a car.

      Car are and will become more appliance like. Even now with the massive increase in SUVs and CUVs show utility overrides, handling characteristics and power to weight ratio. So cars are appliances at the end of the day.

      I know if a household today needed to decide if investing in a robot to mow the lawn, move sh#t around, clean the house and dishes, etc versus the want for a huge vehicle or a vehicle able to complete tasks and activities of hauling and transporting the robot and smaller vehicle would win hands down.

      These mobility devices are the future, like cars once were. And like like cars mobility devices will offer more freedom to people.

      So, who should make these? Why not an auto manufacturer. There now is massive tech transfer in mass producing these in the auto industry, more so than any other industry.

      • 0 avatar
        TimK

        Visions of the future. Shiny robots, flying cars, mobility!

        “On that train all graphite and glitter
        Undersea by rail
        Ninety minutes from new york to paris
        A just machine to make big decisions
        Programmed by fellows with compassion and vision
        We’ll be clean when their work is done
        We’ll be eternally free yes and eternally young

        What a beautiful world this will be
        What a glorious time to be free”
        – – Donald Fagan ‘I.G.Y.’

        “If you want a vision of the future, imagine a boot stamping on a human face — forever.”
        – – George Orwell ‘Nineteen Eighty Four’

    • 0 avatar
      PandaBear

      1. No, having fewer cars per family would happen, instead of everyone buying an pickup for that once a year hauling, they’ll rent it when they need and keep a CUV or sedan most of the time. Then maybe uber 3x a year as needed.

      2. They will survive if they convert to a “solution” company like Aisin, ZF, Delphi, etc. Depends on battery and oil price people will tolerate some limitation, like keeping a 40 mile EV and then once a year rental of a gas car, or one 40 miles EV + 20mpg SUV per family. Tesla will need to eventually downgrade to provide a cheap Leaf level car, or sell technologies to other companies for these cars.

      3. Interest rate, economy, oil price, etc will eventually balanced out and everyone will be ok, even if it means shrinking to a smaller size of its former self.

  • avatar
    Steve203

    With the automakers, particularly the big three, seeking to increase average transaction price and gross margin/vehicle, they are abandoning market segments, and entire geographic regions, with the result of fewer models offered and fewer vehicles sold. Layoffs are the inevitable result.

    The other inevitable result is rising prices as there are fewer units to amortize overhead, creating more margin pressure, and more lost sales due to customers not being able to afford the new models. Then more layoffs as the companies try to get the cost cut curve ahead of the falling revenue curve, but the falling revenue curve is a result of the cost cut curve, so they feed off each-other. If this sounds like a death spiral to you, you may be right.

  • avatar
    JimZ

    Adam Jonas can take a flying leap. He’d happily see a million people tossed out of work if it’d make his share holdings increase a few percent.

  • avatar
    volvo

    Lots of great comments. I would second

    Newer cars seems to have lower quality materials and build without much added in the area of technology. Don’t even get me started on design. Why trade an 05-09 model without major problems? On my 09 adding very capable bluetooth and backup camera was the matter on installing a $300 upgraded AV head.

    Spot on about late gen x and millennials only wanting cars if absolutely needed. Working in a major urban area with even minimally adequate public transportation means these workers can forego the hassle and expense of vehicle ownership. Money tied up in the vehicle, financing costs, service and repairs, fuel, use taxes, insurance and parking can buy a lot of public transit tickets and ride sharing. Rent a car for a weekend out of town.

    As to hiring illegals that is complex. There are many hard working skilled workers in that pool but their immigration status pushes down the salaries they can demand. Employers may take advantage of that. Firm implementation of E-Verify would help clean up that problem but should be paired with a program to enroll these workers in programs leading to legal status (green card holder) and eventually full citizenship.

    • 0 avatar
      Arthur Dailey

      @Volvo, agree. However the easiest way to eliminate the hiring/exploitation of illegal workers is to prosecute the executives of the organizations that employ them. Regardless of the size of the company or the social status/political connections of the employer.

      I highly recommend watching the movie Border Incident filmed in 1949, regarding the smuggling and use of illegal Mexican workers.

  • avatar
    ToddAtlasF1

    Is there a precedent for an industry voluntarily contracting towards extinction in order to shrink the middle class to appease a crackpot religion?

    • 0 avatar
      Steve203

      “Is there a precedent for an industry voluntarily contracting towards extinction in order to shrink the middle class to appease a crackpot religion?”

      I’m not sure about the crackpot religion part, but Radio Shack shrank itself to extinction. When discounters like Best Buy showed up, RS never changed it’s business model to be cost competitive. Instead, RS cut product line after product line as the margins fell below what RS wanted. Finally, RS had nothing left but small parts and selling other company’s cell phone service. But the cell carriers had their own cell phone stores, and didn’t care if their stores made a profit, because they made their profit on the services the stores sold. There was no room for RS to make any sort of a profit and they went toes up.

      Without intending to be sarcastic, GM has been very effectively shrinking itself toward extinction for 40 years. They have eliminated “redundant” divisions, eliminated “redundant” models, eliminated “redundant” factories, and eliminated “redundant” people, so now their market share is less than half what it was 40 years ago. Then they added a Ch11 action to roger their creditors and dealers. Was it Rick Wagoner who said they wanted to do it “deeper, harder and faster”?

      • 0 avatar

        Whatever RS sold you could and can buy on Amazon with two days delivery if not faster. or go to Fry’s if its door are still open.

        • 0 avatar
          krhodes1

          Not helpful when you need it now. And the nearest Frye’s is 600 miles away. Not all of us live in urban California.

          But I agree RS long since got themselves into an unsustainable business model.

          • 0 avatar

            The fundamental problem with RS is that choice of components is very limited while on Amazon you can buy anything made anywhere in the world.

            But I agree with you – it is convenient. When my Samsung HD TV broke I just drove to RS and bought capacitors for power supply. I was lucky and snatched last ones. I even bought VCR and my first BD player in RS and even some exotics like LiteOn DVD recorder (to transfer Hi8 cassettes to MPEG files).

    • 0 avatar
      JimZ

      “Is there a precedent for an industry voluntarily contracting towards extinction in order to shrink the middle class to appease a crackpot religion?”

      yes, but only in the imagination of a Rand-worshiping reddit dweller.

  • avatar
    Lorenzo

    There’s a solution to the high cost of technology: dump the technology. Do you know how many people could do without a screen and menu, and would rather handle heating/cooling/radio with simple buttons and knobs? Heck, most people could do without keyless entry and keyless ignition.

    Most people don’t use many of the “features” available anyway, but given the lifespan of electronics, they may end up with a perfectly running car with basic heating/cooling/radio controls that are inoperable. That tech a few years later can be repaired or replaced only at great expense or not at all. There will be a need for retrofits of basic controls, or cars will be junked with perfectly usable drivetrains.

    The money automakers save getting off the high tech kick can allow them to lower prices, sell more cars, and keep their trained workforce. Like model proliferation, competition with high tech features should end.

    • 0 avatar
      jack4x

      The Luddite attitude is remarkably strong on TTAC (LMAO at the comments on the other article wishing for new cars without ABS or airbags) but it’s flawed for a few reasons:

      -The market has spoken and wants these features. The commentors here are not representative of the typical new car buyer in any way.

      -It’s a fallacy that touchscreens and safety features add a lot of cost to cars. The hardware gets cheaper every year and lines of code are virtually free. It’s also helpful for manufacturing efficiency to standardize as much as possible; if the high trim is going to offer features, sometimes it’s not worth building a low cost trim without them. By the time unique parts are designed, tooled, quoted, sourced, inventoried, and installed for that model, there’s no savings anyways. Might as well make it all standard.

      It’s also important to remember, as I have pointed out many times here, that cars cost the same in inflation adjusted terms as they always have. Tech is not putting new cars any more out of reach than they ever have been.

    • 0 avatar
      krhodes1

      Reality is most people don’t keep cars long enough to care. And you wildly overestimate the cost of the electronic goodies these days. It’s almost certainly cheaper to make a screen than physical controls.

      I have no interest in going back to screwing around with keys. But I agree that I want my HVAC controls to be physical. Of course they are just knobs controlling electronics, but for ergonomic reasons I want them to be knobs. Sliders are OK too, but I prefer knobs.

  • avatar
    volvo

    The technical obsolescence you talk about is not a flaw but a feature.

  • avatar

    effective marketing will separate winners from losers

    • 0 avatar
      SuperCarEnthusiast

      Right, Chevrolet should be way ahead of the game since their car commercials make people think they are buying something they are not like a brand new Germany luxury brand that cost 3X more then a Chevrolet! LOL!

      • 0 avatar
        mcs

        From Chevy Blazer Ad:

        “It looks like a piece of candy”
        “This is my sexy mom car”
        “I would feel like a cooler dad”
        “I don’t know who they got to design this but give them a cookie and a star”

        Makes you want to run out and buy one.
        To be honest, I think the ad insults peoples intelligence. Do they think people are so stupid that they’ll run out and buy one after seeing that ad? Does the thing really look like it would make you sexier or cooler?

        https://www.ispot.tv/ad/IvFL/2019-chevrolet-blazer-speaks-for-itself-t1#

      • 0 avatar
        mcs

        From Chevy Blazer Ad:

        “It looks like a piece of candy”
        “This is my sexy mom car”
        “I would feel like a cooler dad”
        “I don’t know who they got to design this but give them a cookie and a star”

        Makes you want to run out and buy one.
        To be honest, I think the ad insults peoples intelligence. Do they think people are so stupid that they’ll run out and buy one after seeing that ad? Does the thing really look like it would make you sexier or cooler?

        https://www.ispot.tv/ad/IvFL/2019-chevrolet-blazer-speaks-for-itself-t1#


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